Washington
— It must be an exciting time to be a savings-and-loan executive. Consider two recent illustrations: * The Buffalo Savings Bank announced a few weeks ago that it wanted people who had taken out 8 1/2 percent mortgages in 1976 to convert them to 14 percent mortgages. The public outcry was so deafening, the bank backed off a week later , admitting that it "made a mistake" in gauging public opinion.

* The Midwest Savings Bank in Cincinnati last month began offering 10 percent interest on regular passbook accounts. Did the competition follow suit? No. Instead, it called it "suicidal" and began to wait for the bank's collapse. Meanwhile, Midwest employees put in overtime so they could process all the new accounts and deposits.

Facing one of the most serious periods of tight earnings in its history, the nation's thrift industry is trying to be creative in its search for ways out of the red ink. For years, the S&amp;Ls did what was expected of them and wrote millions of mortgages that are still earning only 6- to 10-percent interest; meanwhile, they have to pay 15 to 18 percent for much of the money to write new mortgages.

Under these circumstances, S&amp;L executives are finding that creativity isn't enough. One way many S&amp;Ls have been escaping financial straits is through merges, notes Arthur Edgeworth, chief lobbyist for the US League of Savings Associations. There were about 140 S&amp;L mergers last year, and that number is likely to be double before this year is out, he notes.

But the bankers are also buying a lot of plane tickets to Washington so they put the arm on congressmen, agencies, and lobbyists, seeking changes in the laws and regulations that govern their operations.

Thousands of air-miles later, it looks as though the S&amp;Ls are finding some sympathetic ears.

"In terms of the industry being in a substantial earning pinch, the situation certainly is serious," says Richard T. Pratt, chairman of the Federal Home Loan Board, the S&amp;Ls primary regulator. "Sixty percent of associations' mortgage portfolios have yield of less than 10 percent, and they're buying money to support those portfolios at around 15 and 16 percent," he says. "That's a substantial problem."

"We're watching it very closely," said Henry C. Wallich, a Federal Reserve Board member. "Sometimes there's a danger that things get overdone, but it is true that the S&amp;Ls have negative earnings, and if you have negative earnings long enough, you eat up your surplus, which is their capital."

"A lot of institutions in the thrift industry are not in any danger at this point, as far as going out of existence or into bankruptcy is concerned," noted Sen. Jake Garn (R) of Utah, chairman of the Senate Banking Committee. "But if interest rates continue at this level for several months or a year or more, then you could have a great deal of them in difficulty."

So, S&amp;L managers hope this apparent consensus of voices -- and eventual lower interest rates -- will lead to new legislation and regulations to help them out of their plight. In Mr. Pratt's case, he has proposed a regulation to allow thrifts to sell their old, low-yielding loans at a loss. For tax purposes, they could spread these losses over the remaining term of the loans. "This would allow them [S&amp;Ls] to turn these mortgages into liquidity or better investment opportunities they might have," Pratt says.

Also, he noted, if Congress is going to give S&amp;Ls interest rates that are competitive with nonbank institutions like money-market mutual funds, "they should also be able to compete in the way use their funds. So we're aggresively pushing for the right for savings-and-loan associations to make commercial loans , leasing, other types of real estate loans than they have been able to make in the past."

S&amp;Ls should also be able to accept checking accounts from corporations, businesses, and government units, as commercial banks are permitted to do, he said.

Senator Garn, meanwhile, is preparing legislation that would offer the industry some help. Among other things, the bill would give regulators power to authorize a broader range of mergers among S&amp;Ls and between banks and S&amp;Ls, and possible revisions in the Glass-Steagall Act, which prohibits banking institutions from dealing in the securities business.

"Government has to take a big part of the blame" for the S&amp;Ls' troubles, Mr. Garn said. "Not only because of high interest rates [for borrowing] due to deficits, but from the fact that we have had ceilings on interest rates [for deposits], prohibiting institutions from paying reasonable interest."

But before a batch of new laws and regulations liberalizing the activities of the S&amp;L industry are passed, some analysts believe people should remember why they were put there in the first place.

"Most of the controls on the banking system today were put in place in the 1930s as an attempt to institute 'prudent' banking behavior after the excesses of the 1920s," said Robert J. Avila, chief economist with SAGE Associates, a New York statistical analysis and corporate planning firm. Many of these excesses, he said, involved banks trying to compete with one another by offering very high interest on deposits and engaging in securities transactions.

"A whole generation of bankers is used to being protected by the Federal Reserve, and no one can quite remember why these rules were put up there," Mr. Avila said. A trip through the history books would be an appropriate exercise, he concluded.